Are Limited company Buy to Let Mortgages the way forward?

Thursday, September 22nd, 2016

Given some really competitive product pricing by lenders and the fact that rental calculations are for the most part more generous, buying property via a Limited company is now becoming an increasingly enticing prospect.

That many investors are now considering this route is due in part to the much heralded proposed tax changes. In response, lenders operating in this market are increasing support and fine tuning their processes to accommodate the increased demand for these Limited company buy to let mortgages.

This commitment is demonstrated in a number of areas including the product offering, with the average interest rate having dropped from around 4.1 per cent to around 3.7 per cent in the space of just 6 months. This change in part is due to many lenders no longer applying a pricing premium for Limited company buy to let mortgages.

Buy to Let Calculations are changing

Here at Caboodle Financial Services Limited, we see that the other area investors can benefit from is in the rental calculation itself. Many lenders offering mainstream residential buy to let mortgages (i.e. where a buy to let property is acquired and held by an individual) have changed the way they calculate affordability and have now moved to typically assessing minimum rental coverage at around 140-145 per cent based on a notional interest rate of 5.5 per cent. These changes are as a result of proposals by the Prudential Regulation Authority, the body which, since 2012 has been responsible for the regulation and supervision of around 1,700 banks, building societies, credit unions, insurers and major investment firms

By comparison, rental calculations for Limited company buy to let mortgages are still around the 125 per cent mark based on a charging rate at 5 per cent, which currently makes them appealing for investors wanting to leverage their assets to the maximum level as they will be able to borrow more given the significant difference in the two calculations.

There is still time to act

The tax changes referred to above are being phased in from April 2017 and will be fully in force by the beginning of the 2020/21 tax year. The main impact of the changes will mean that individual landlords will only be able to claim interest relief at the basic rate of tax, (not the higher rate as was the case previously), which will mean that some higher rate taxpayers may now see a significant change in their overall net position.

Consequently, many accountants and tax advisers are now recommending that one solution for some higher rate taxpayers is to hold their property portfolios in a Limited company, which will then set them outside of the personal tax regime and make them subject to Corporation tax instead, but as each case needs to be reviewed on its own merits, professional advice is crucial here.

Are you considering buy to let and need some impartial advice? Click HERE to contact Caboodle Finance, of Sutton Coldfield, Birmingham or alternatively just call 0121 308 9114 today and our friendly team will be more than happy to help you.


Your initial consultation is free and you are under no obligation to proceed with a mortgage we recommend. There will be a fee for mortgage advice. The exact fee will depend on your circumstances and may be reduced depending on the loan amount and any commission we receive from the lender. It is estimated that the fee will be £595, but it may range from £495 to 1% of the amount you borrow. The fee is only payable on completion and can normally be added to the mortgage. This will be discussed and agreed with you before you make an application. Please ask for a personalised illustration.

Secured loan rates from 3.95% APRC, although we have plans available up to 29.9% APRC which allow us to assist customers with the most severe credit problems. The overall cost for comparison is 7.65% APRC. For secured loans a broker fee up to 10% of the loan amount borrowed may be payable on successful completion. A lender fee may also apply. The actual APRC available will depend on your circumstances. All loans are subject to status. Please ask for a personalised illustration.

The guidance and/or advice contained in this website is subject to UK regulatory regime and is therefore restricted to consumers based in the UK.

Caboodle Financial Services Ltd, registered in England at Mere Green House, 46-48 Mere Green Road, Sutton Coldfield, West Midlands B75 5BT (number 08044670).
Caboodle Financial Services Ltd is an appointed representative of PRIMIS Mortgage Network (PRIMIS), a trading name of Advance Mortgage Funding Ltd which is authorised and regulated by the Financial Conduct Authority. PRIMIS is only responsible for the service and quality of advice provided to you in relation to mortgages, protection insurance and general insurance products. Any other product or service offered by Caboodle Financial Services Ltd may not be the responsibility of PRIMIS and may also not be subject to regulation by the Financial Conduct Authority. The Financial Conduct Authority does not regulate some forms of Buy to Let.

© 2020 Caboodle Financial Services Ltd